Video game retailer shares GameStop Corporation (NYSE:GME) have traded higher in recent weeks on optimism from the return of Noisy kitten (does it have Keith Gill) and some stock offerings that raise money for the company.
An analyst shared his view on the latest events and the latest stock offering.
What happened: Over the past 30 days, GameStop completed two IPOs, selling groups of 45 million and 75 million shares.
The most recent sale of 75 million shares raised $2.137 billion, which translates to an average share price of $28.50.
Wedbush analyst Michael Pachter criticizes the sale price in a recent investor note.
“Given that GameStop’s share price closed at $46 on June 6, we had assumed it would end the sale at an average price of $40. Instead, shares fell sharply on June 7, reflecting the news from Reddit after a rambling presentation by Roaring Kitty (Keith Gill), Pachter said.
The analyst has an underweight rating and lowered the price target from $13.50 to $11.
Pachter said the new price target reflected “lower-than-expected proceeds from the stock offering.” The analyst estimated GameStop had about $9.50 per share in net cash.
Wednesday, Citron Research also announced that it was no longer short GameStop.
“It’s not that we believe a turnaround for the company’s fundamentals will ever happen, but with $4 billion in the bank, they have enough runway to appease their cult-like shareholders,” Citron’s. Andrew Left posted on Twitter.
Left previously told Benzinga that he was short GameStop stock again. Lefty was one of the key figures in GameStop’s 2021 stock short rally.
Related: Who is Roaring Kitty? Why does his return to social media matter for GameStop Stock?
What to expect next: The offers from GameStop draw mixed reviews from Pachter and Left as the games retailer may have benefited from a boost in stock price from increased trading activity in recent weeks.
GameStop has said it will use the net proceeds from the offering for “general corporate purposes, which may include acquisitions and investments.”
Investors seem excited about the potential of acquisitions and investments, with many GameStop shareholders, including Roaring Kitty, buying into the CEO’s turnaround strategy. Ryan Cohen.
The two IPOs raised $933.4 million and $2.137 billion, respectively, adding $3 billion to GameStop’s balance sheet.
GameStop ended the first quarter on May 4 with $1.083 billion. The company previously said its cash balance was $1.2 billion at the end of the fourth quarter.
The cash balance can give optimism for several reasons. First, the possibility of investments and purchases. With a shift into digital gaming, GameStop may look to diversify away from physical games for future growth.
Another point to keep in mind is GameStop’s announcement last year that CEO Cohen now has additional control over the company’s cash holdings. Cohen can buy and sell stocks and make other investments.
“On December 5, 2023, the Board of Directors approved a new investment policy that allows the Company to invest in equity securities, among other investments,” the company said previously.
GameStop’s listing did not mention cryptocurrency Bitcoin (CRYPTO: BTC), but investors are excited about the potential for cryptocurrency investments. Investors would like to see Cohen invest some or all of the company’s money in Bitcoin and turn GameStop into a trading tool similar to MicroStrategywhose former CEO and current chairman Michael Saylor started buying Bitcoin with the company’s money.
As mentioned by Left, the new cash balance could help provide a runway for shareholders.
GameStop reported adjusted net income of $6.7 million in fiscal 2023, which was an improvement from a loss of $13.1 million in 2022.
The company has struggled in recent quarters with losses, but some quarters have seen positive earnings per share.
Here are the most recent quarters with data from Benzinga Pro:
Q1 2024: -$0.12
Q4 2023: $0.22
Q3 2023: $0.00
Q2 2023: -$0.03
Q1 2023: -$0.14
With the new cash balance, GameStop now has more potential to survive future losses. The cash balance gives the company the ability to make acquisitions and investments, but more importantly, the ability not to borrow or potentially not need to raise more capital in the coming years.
Investors are eagerly awaiting details on what GameStop will do with the money in the coming months, but now many, including Roaring Kitty, are betting that Cohen will make the right moves.
GME Award Action: Shares of GameStop fell 1.87% to $29.92 on Wednesday versus a 52-week trading range of $9.95 to $64.83.
Read Next: 5 Ways GameStop Could Disrupt Meme Stocks Rally: Stock Deals, Boredom, and More
Photo: Shutterstock
Latest ratings for GME
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date |
Strong |
action |
from |
THE |
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December 2021 |
Adhesive Capital |
Save |
for sale |
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June 2021 |
Wedbush |
Save |
Poor performance |
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April 2021 |
Adhesive Capital |
decreases |
Keep |
for sale |
See more analyst ratings for GME
Check out the latest analyst ratings
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This article GameStop Analyst Cuts Price Target After ‘Rambling By Roaring Kitty Presentation’: Does Video Game Company Have ‘Enough Runway To Appease Its Cult-Like Shareholders’? originally appeared on Benzinga.com
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